Bitcoin's Carry Trade Just Got Demoted by Treasuries 📉

The once-lucrative bitcoin futures carry trade has lost its shine, now yielding less than the humblest of U.S. government bonds. Quarterly basis returns have trailed two-year Treasury notes continuously since February, marking 157 straight days of underperformance and the longest such stretch since a six-month run from August 2022 into January 2023, according to Glassnode data.

During the 2021 bull market, annualized basis yields topped 20% across regulated and unregulated venues, drawing arbitrage desks that profited from the gap between futures and spot prices by shorting futures while buying spot. That trade now returns just 3%, compared with an average 3.8% yield on two-year Treasuries. "Three-month futures basis has paid less than a two-year Treasury since February. Only one other stretch on record has run this long: August 2022 into January 2023. It ended at the cycle low," Glassnode said in a Telegram post. Bitcoin ($BTC) traded at $62,709.09, up 0.68%.

The collapse of the premium has drained activity from the futures market. July volume on bitcoin futures fell to just over $880 million, extending a sharp decline from February's $1.47 trillion peak, according to Coinglass data.

Analysts describe the shrinking basis as a sign of a maturing market rather than a crisis. As price discrepancies between linked instruments tighten, the result is narrower bid-ask spreads, easier hedging and fewer outsized arbitrage opportunities for traders hunting inefficiencies.